The collapse of the Chinese real estate market has brought about a new phenomenon – the takeover of properties from owners who have defaulted on their loan obligations. According to a recent report by China Real Estate Information Corp., in the first half of 2024, 202,000 homes were put up for resale after being seized from individuals and companies unable to meet their loan repayments. This marks a 12% increase from the previous year.
One of the contributing factors to this situation is the high-value loans that were taken out to purchase homes in the past. With incomes decreasing due to economic challenges both domestically and internationally, many borrowers are finding it difficult to keep up with their mortgage payments. As a result, households are struggling to meet their financial obligations.
Another issue contributing to the crisis is the financial difficulties faced by developers. In cities like ZhengZhou, the capital of Henan province, developers are abandoning or halting construction projects due to financial constraints. When developers fail to repay their loans, lenders have the right to seize the property and sell it at auction to recover their losses.
The average nationwide price of seized homes sold in the first half of this year has dropped by 6.7% to 9084 RMB (approximately 4925 PLN) per square meter. This decline can be attributed to an increase in the number of homes being sold at secondary auctions, where prices are typically lower than the initial listing.
Similar to the process of foreclosure auctions in Poland, property auctions in China do not always guarantee that banks will recover their loaned funds. The lengthy and costly administrative and judicial process of foreclosure in China often leads banks to negotiate with borrowers to establish new repayment terms for their mortgages.
In major cities like Beijing, GuangZhou, ChengDu, and ShenZhen, banks are offering borrowers the option to first repay the interest on their mortgages before tackling the principal amount, in an effort to ease the financial burden on homeowners.
Overall, the current state of the Chinese real estate market reflects a complex interplay of economic factors and regulatory challenges. As the situation continues to evolve, it is crucial for stakeholders to adapt and find sustainable solutions to address the growing number of property takeovers and defaults.
By 梁安基 Andrzej Z. Liang, Shanghai, China
Email: azliang@chinamail.com
Editor: Leszek B. Ślazyk
Email: kontakt@chiny24.com
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